It Wall Street JournalTesla CEO Elon Musk claims to be in talks to raise as much as $3 billion for the partial repayment of debts relating to his acquisition of Twitter.
It Wall Street Journal According to reports, Elon Musk (CEO of Tesla and SpaceX) is currently in talks with investors in order to raise as much as $3 billion. This will help pay some of the $13 Billion in debt that he took out in connection to his acquisition of Twitter. Sources with knowledge of the situation claim that Musk’s representatives talked about selling up to $3 billion in brand-new Twitter shares last month. If funds were raised, they would be applied to the highest-interest-rate, unsecured portion of the $13 billion Twitter loan package.
Twitter’s debt repayment would provide a vital financial boost. Twitter has had a difficult time keeping advertisers on the platform. Musk stated that Twitter was suffering from “a massive drop in revenue”He was losing $4,000,000 per day on November. He also suggested that the company could file for bankruptcy. Musk provided a positive outlook on the company after cutting 6,000 jobs. He predicted that Twitter would break even by 2023.
Musk’s team reportedly contacted potential investors about raising fresh equity funding at the original Twitter takeover price in the middle of December. However, some potential backers claimed they objected to the terms due to uncertainties surrounding Twitter’s financial health.
According to public filings, Fidelity, one of the co-investors who supported Musk’s acquisition of Twitter, wrote down its stake in the company by 56 percent in November, suggesting Musk would have difficulty finding outside investors willing to put up money at the original valuation. Sources claim that no notice has been sent to banks holding $13 billion of debt supporting Musk’s takeover.
Musk’s $3 billion in unsecured bridge loans was the most costly part of his $13 billion debt. These loans are subject to an additional 10% interest rate and the benchmark secured overnight lending rate of 4.3 percent, after rising in recent months.
According to the regulatory filings, each quarter the interest rate goes up by 0.50 percentage point without Twitter refinancing debt. According to the filings, Musk’s first quarterly interest payment is due at the end of the month. Twitter’s annual interest cost has increased by $100 million since Musk made the announcement of the takeover deal in April 2013. This is due to the increase in the overnight Rate.
Twitter’s debt would be much lower after it has paid off its unsecured bridge loans. According to publicly available documents, the annual interest on Musk’s $6.5 billion in term loans and $3 billion in secured bridge loans is 4.75 percent and 6.75 percent, respectively, plus the overnight rate.
A potential agreement would also offer relief to the banks supporting Musk’s acquisition of the social media company. The original plan was to sell the debt to investors outside, but they changed their minds after Wall Street became less interested in risky loans and bonds due to market conditions.
Breitbart News reporter Lucas Nolan covers issues related to free speech, online censorship and other topics. Follow Lucas Nolan on Twitter @LucasNolan
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